My First Employee: An Empirical Investigation

23 Pages Posted: 13 Jul 2016

See all articles by Alex Coad

Alex Coad

CENTRUM Catolica Graduate Business School

Kristian Nielsen

Aalborg University - Department of Business and Management

Bram Timmermans

Norwegian School of Economics (NHH); Aalborg University, Department of Business and Management

Date Written: July 13, 2016

Abstract

The challenge for solo entrepreneurs to add their first employee is arguably the single biggest growth event facing any growing firm. To understand how this event affects performance, and the antecedents of hiring, we analyse Danish matched employer–employee data. Those who hire enjoy superior sales outcomes in subsequent years, while the dispersion in profits increases. Furthermore, those that hire enjoy faster sales growth in the previous year, suggesting that sales growth precedes the first hire. Finally, we show that founders with a stronger profile in terms of education and previous income are more likely to increase profits, while the characteristics of the employee are less important. The latter finding is important from a job creation perspective, in light of the suggested sorting of more marginalized employees into new and established firms.

Keywords: Solo entrepreneurs, Recruitment, Firm growth, Post-entry growth, Scale-up, Employment growth, Sales growth, Founders, New firm growth

JEL Classification: L25

Suggested Citation

Coad, Alex and Nielsen, Kristian and Timmermans, Bram, My First Employee: An Empirical Investigation (July 13, 2016). Small Business Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2809042

Alex Coad (Contact Author)

CENTRUM Catolica Graduate Business School ( email )

1801 Universitaria Avenue
San Miguel
Lima, Lima Lima32
Peru

Kristian Nielsen

Aalborg University - Department of Business and Management ( email )

Aalborg, DK-9220
Denmark
+45 99408334 (Phone)

Bram Timmermans

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Aalborg University, Department of Business and Management

Fibigerstræde 4
Aalborg, DK-9220
Denmark

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